Human Capital and Creation of Reputation and Financial Performance

Abstract

Abstract: The aim of this paper is to show how managing human capital companies are able to enhance their corporate reputation and financial performance. In particular, this preliminary study analyses the impact of human capital on reputation perceived by employees and financial performance (by means of the return on capital employed ‑ROCE‑). Using a database of Spanish audit sector and applying an exploratory and confirmatory factor analyses, three factors of human capital are obtained (Staff Quality, Staff Management and Staff Results) which have been related to the dimensions of employees views of reputation and ROCE through a path analysis. The results reveal that staff quality (firms with creative employees, who perform their best and think actions through, and where there is no trouble if individuals left) has a significant and positive influence on all the dimensions of reputation. Staff management (firms with clear recruitment and succession training programs, upgrade employees skills and employees who give their all) has a significant and positive impact on resource management, ethics and media reputation. Staff results (employees are satisfied and they do not have to bring down to others level) have a positive and significant effect on business leadership, resource management, ethics and media reputation. No significant effects are found in when human capital factors and financial performance are linked as a consequence of the financial crisis. We also obtained unexpected results in the impact of reputation perceived by employees on financial performance. In any case, a practical implication for these results is that service companies which manage adequately their human capital can increase the employee views of corporate reputation, having the factor Staff Quality a double significant and positive influence on reputation than other two factors.